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The Future of Travel and Tourism – The View to 2015 Background Data for ITB Berlin Keynote Address March 11th 2009 Rohit Talwar – CEO – Fast Future Research March 9th 20091. The Future of Travel, Meetings and Events in 2015This paper provides some of the background data for my keynote speech to the ITB Convention in Berlinon March 11th 2009. It draws on the global electronic survey we are currently running on the Future ofTravel, Meetings and Events to 2015. At the time of writing we have received 561 responses from 54countries, with the largest respondent groups coming from the USA (30%), the UK (24%), UAE (6%),India (5%) and Germany, the Netherlands and Canada (3% each). Of these, 51% come from the traveland meetings sector. The majority of questions took the form of statements which participants wereasked to evaluate (Very Likely, Likely, Unlikely, Very Unlikely). The survey will run until April 10th 2009,to take part go to:http://www.zoomerang.com/Survey/survey-intro.zgi?p=WEB228UL58782S2. Survey ThemesThe survey looked at a number of issues around the future of the travel and meetings sectors. In thispaper I have focused on 11 travel related themes – these are explored in the following sections:• Addressing the Current Downturn• The Air Transport Industry in 2015• The Visitor Experience in 2015• New Revenue Sources in 2015• Travel Technology in 2015• Experience Technology in 2015• Air Travel Volumes and Intentions in 2015• Environmental Considerations for Travel in 2015• Travel Budgets in 2015• Hotel Technology in 2015• Tourism Investment in 20153. Addressing the Current DownturnRespondents were asked to assess various scenarios for how the downturn may play out, describe theirresponse strategies and answer two multiple choice questions on survival tactics and priorities. The tablebelow shows five different possible scenarios presented and the percentage ranking each as likely orvery likely. The most common expectation is that the downturn will end in 2010 (60%).The Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009

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Global Economic Scenario % rating it likely or very likelyThe global downturn will end in late 2009 / early 2010, growth will return to 442008 levels by 2012 and the global economy will be booming by 2015.Business revenues will fall on average by up to 20% during the downturnThe global downturn will end in mid to late 2010, growth will return to 2008 60levels by 2013 and the global economy will be booming by 2015. Businessrevenues will fall on average by up to 30% during the downturnThe global downturn will not end until 2011. Growth will only return to 2008 38levels by 2014. Growth will continue at those levels through to 2015. Businessrevenues will fall on average by up to 40% during the downturnThe global downturn will run until at least 2013, growth will only return to 2008 20levels by 2015. Business revenues will fall on average up to 50% in thedownturnA temporary upturn in global economies will start in mid to late 2009. However, 26further shocks in the financial system will drive the world into a much deeperdownturn towards the end of 2010. The resulting depression will last through to2015. Business revenues fall by more than 50% during the depressionWe asked those working in the travel and meetings industry to select all the actions they were currentlytaking to address the downturn from a long list of possible options. The most common answers were:• Cost cutting 62%• Improving customer service 46%• Emphasis on innovation 46%• Increasing use of partnerships 43%• Changing organisational structure 38%Perhaps the most surprising responses were that just 22% were undertaking staff motivation activitiesand only 34% were making greater use of the online channel. Not everyone was being affected equally,and so while 34% were reducing headcounts, 5% were actually increasing staffing and 8% wereincreasing training expenditure.When asked “What do you consider to be the three most important priorities for surviving in a downturn?”the top responses selected were:• Clear direction and strategy 62%• Customer relationships 51%• Cash flow management 38%• Innovation 30%• Cost control 29%Again staff motivation was not considered a priority – with only 17% ranking it in their top 3 and only 8%prioritising greater use of the internet.The Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009

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4. The Air Transport Industry in 2015With up to fifty airlines reported to have closed or merged in 2008, a rising impact from the downturn,high levels of debt, route closures and mounting losses, the airline sector is facing one of the mostchallenging periods in its history. Respondents were asked to evaluate a series of propositions abouthow the sector could develop in the period to 2015 – these are presented in the table below. Asia isexpected to become the largest aviation market by 73% of respondents.Despite the current dire warnings about the fate of smaller airports, only a minority expect to see largescale closures of US (38%) and European (40%) airports. While the majority (64%) expect that less thanhalf the current low cost carriers will still be around in 2015, there is a strong expectation of renewal inthe sector. 62% believe a new era in air transport will open up, with new business models that enablecurrent airlines to survive and a number of new airlines to start up. Rail is expected to see strong growthin Europe with two thirds of respondents (66%) believing that travellers in Europe will favour rail overflying as compared to only 18% for the US.Proposition % rating it likely or very likelyAirline consolidation and route closure will mean less than100 US airports will 38be offering scheduled daily flights In Europe, only major cities will be able to maintain a commercially viable 40airport Asia will be the largest aviation market 73Airline consolidations and failures will result in only one or two major 47international carriers on each continentMiddle East airlines will have bought up many of the most well known airlines 30in Europe, North America and AsiaA new era in air transport opens up with new business models that enable 62current airlines to survive and a number of new airlines to start upLess than half the current low cost carriers will still be operating around the 64globeThere will be a massive growth in low cost carriers 49Business class only airlines will have at least 10% of the premium market on 47every continentTravellers in Europe will favour rail over flying 66Travellers in the US will favour rail over flying 185. The Visitor Experience in 2015Prior to the downturn, there was growing emphasis on the nature of the visitor experience and theimportance of understanding how consumer attitudes were changing around the purpose, duration andpreferred destination for their vacations. To assess the relative future importance of these factors,respondents were asked to assess a number of statements about the visitor experience in 2015.The Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009

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While 47% think it is likely or very likely that they will be taking more vacations, 48% expect them to beshorter but only 26% expect to follow the current growing trend of taking more one night breaks even tolong haul destinations (e.g. 4-6 hours away). Economic pressures are clearly influencing respondents –only 20% expect to purchase more luxury travel as compared to 70% who say they will be increasinglypurchase low cost breaks. In line with the low cost focus, the trend towards online research andpurchasing of travel is expected to continue. 74% are likely to use social networks to research trips andseek out deals and 95% say they will use the internet to book the bulk of their travel.Despite recent forecasts of the growth of hub hotels, only 23% say they will be attracted to stay inintegrated facilities that combine an airport, hotel and leisure facilities. While 81% expect relaxation to bea primary driver of their vacation, 76% say the cultural experience will be an important influence on theirdecision. 62% expect sustainability to be an important influencing factor. The reaction against over-development of destinations is clear – with 80% saying they will increasingly seek out less popular, moreunusual and less commercialized destinations.6. New Revenue Sources in 2015Respondents were asked to assess the likelihood of six strategies which the travel sector might adopt togenerate new revenues in the face of growing pressure on price and margins. 81% think that productvendors will be willing to pay to present to the ‘high net worth’ individuals who are ‘captive’ in an airport,flight or hotel room on a holiday. Fully 85% expect that vendors will test new products in flight or incustomers’ rooms and survey their opinions via the seatback TV / room TV. Given the increasing amountof time passengers spend waiting in airports, 66% think it likely that we will see ‘experience lounges’ inairports that pay high net worth individuals and business customers to test out new products.As marketing strategies become ever more targeted and consumer profiling techniques are refined, 53%think product manufacturers and marketers will take proven high spenders on free product testingconventions or holidays. As travel agents come under increasing pressure from direct booking, 67% ofrespondents think agents will try to monetise their customer base by charging companies to survey theirnetwork of customers and then share the rewards with customers. 49% think airports will run shortbusiness and personal development seminars for customers waiting to travel – for which a fee would bepayable.7. Travel Technology in 2015The only area where the majority of respondents expect major technology advances are in security. Intheir comments, most expect the downturn to dramatically curtail research and development in newtransport technology. So for example, 90% expect the security clearance will be based on biometrics e.g.fingerprint-based IDs, 3-D face digitization, and iris scans. Furthermore, there is a growing sense thatairports will use technology to speed up the flow of passengers – with 70% believing that airports willincreasingly drive check-in and security clearance offsite to car parks, rail stations and inner city check-ins to improve terminal throughput.Despite the regular headlines and reports of new travel technology developments, expectations ofprogress by 2015 are relatively low. For example only 48% think a prototype hypersonic commercial jetwill have been tested successfully and just 47% expect a dramatic increase in air taxi services carryingup to 20 passengers at a time, flying in personal jets from private airports. A mere 10% believe flyingcars will be legalised for local flights.The Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009

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Commercial space travel is still seen as a distant dream for most of us. Just 29% consider it likely thatcommercial space flight will be available for less than $20,000 per flight by 2015 and just 18% expect thefirst space hotels to be accepting guests for overnight stays. Slightly closer to home, 30% think we mightsee the arrival of helium-filled airship hotels that would allow tourists to visit multiple locations by day,sleep in the airship by night and provide low-altitude photo-opportunities.8. Experience Technology in 2015While the rates of development and take-up of experience technologies such as virtual reality areincreasing, there are mixed expectations over how quickly such technologies will be adopted in thetourism sector. The desire for physical experience appears to have been a strong influence in shapingrespondent expectations – with a clear preference for those developments which enhance rather thanreplace a travel experience. For example, 76% believe visitors will have a single payment card for use atall shops, restaurants and leisure facilities at a destination – with all charges appearing on a single hotelbill. However, only 43% expect the introduction of dynamic pricing applications that guarantee a travellerpays no more than anyone else in their cabin on their flight or in an equivalent room in their hotel whilethey are staying there.Enhancement rather the replacement seems to be the most commonly expected role for augmentedreality technologies. 69% think augmented reality headsets will be used to provide overlays for almost alltourist attractions, showing extra information and allowing visitors to see how the attraction would look atdifferent times of day and under different weather conditions. However, only 33% believe that due tolarge increases in tourism and growing environmental concerns, many places will be forced to restrictaccess, with most people only able to visit replica sites or view them in Virtual Reality and that only therich and important will be able to visit the real sites. Even less – just 23% - subscribe to the currentnotion that ‘the singularity’ is approaching rapidly and that you will be able to download virtualexperiences direct to your brain via the internet so you can have the memory of visiting a destinationwithout ever leaving home.9. Air Travel Volumes and Intentions in 2015Respondents were asked to forecast what would happen to a range of key indicators by 2015, these arelisted in the table below. As can be seen from these initial findings, there are significantly higherexpectations for growth than decline in the cost of domestic and international flight, in the volume of lowcost flights on inter and intra-continental routes and in the volume of international airline passengers.The Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009

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Parameter % expecting % expecting a a rise by fall by 2015 2015Cost of domestic flights 64 37Cost of international flights 62 30Number of domestic flights you will take personally 26 30Number of international flights you will take personally 41 24Volume of flights handled by low cost carriers within each continent 66 25Volume of inter-continental flights handled by low cost carriers 57 26Volume of domestic airline passengers 45 39Volume of international airline passengers 55 3110. Environmental Considerations for Travel in 2015The issue of environmental impact is an ever present topic in any discussion about the future of theindustry. 77% expect that offsetting of emissions will be mandatory for all airlines. However, only 24%expect that regulation and / or consumer attitudes will have hardened so much that hotels and venuesthat do not have a zero environmental footprint (waste, energy use, emissions) will be out of business.There is a growing expectation that offsetting costs for meetings and conventions will need to be borneby either the event organiser (64%), the sponsors (61%) or the local convention and visitor bureaus(49%) rather than directly by the individual event attendee or exhibitor.Only 25% think passengers will face personal carbon limits that dramatically restrict the number of flightsthey can take and just 19% believe that business people will need to apply for permits to fly, proving thebusiness benefit outweighs environmental impact. Should personal restrictions be introduced, 35% thinkhuman rights laws will be used to ensure people can fly as much as they want to see their families. 50%expect that carbon emission limits will force severe restrictions on the cruise industry as shippingemissions start being included in national CO2 limits and 48% expect that a prototype zero emissions jetwill have been tested successfully by 2015.11. Travel Budgets in 2015A key concern across the sector is the impact of the downturn on longer term spending plans andbudgets – with many suggesting that the shift to teleconferencing and virtual events could place a bigdent in both travel volumes and the budgets for individual travellers. The table below shows theforecasted impact on key travel parameters by 2015. As can be seen, across most parameters morerespondents have an expectation of more rather than less activity and of higher prices and higherbudgets for travel and hotel stays.The Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009

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Parameter % expecting a % expecting a rise by 2015 fall by 2015Number of nights you’ll spend in a hotel domestically 31 26Number of nights you’ll spend in a hotel internationally 44 22Price of a 5 star hotel room 56 28Price of a 3 star hotel room 43 34Number of conferences and meetings you’ll attend 29 24Your budget for travel 47 31Your budget for hotel attendance 42 32Your budget for conference / meeting attendance 36 3612. Hotel Technology in 2015Internet connectivity is no longer perceived as a differentiator and 96% think that business hotels will alloffer free wireless broadband as part of the standard offering. Integration of customer data across thevalue chain is expected to improve with 83% expecting customer information to be shared betweentravel agent, airline and hotel to completely personalise the visitor experience.Despite the advances made in robotic technology, their use in hotels is considered some way off. Only44% think that by 2015, guests will be able to conduct an entire hotel stay without contact with humanstaff and just 25% think robotic in-room butlers will be common in 5 star hotels. In the room, only 41%believe visors and large wall-hanging polymer displays will be used to make rooms seem just like thehome or the office at the flick of a switch and just 43% think In-room mirrors will show you how your outfitwill look in different settings e.g. meeting room, daylight, bar or nightclub.13. Tourism Investment in 2015The final set of questions looked at future directions for tourism investment. Given the scale of thesector, more and more destinations are now looking at travel and tourism as a key pillar of theireconomic development strategy. 77% of respondents believe a clear tourism investment strategy will bekey to a destination’s survival.In terms of funding, 67% think public-private partnerships will be the main way to advance tourisminvestment in their country. 66% believe tourism investment will increasingly be driven by the privatesector in their country while 44% suggest it will increasingly be driven by the public sector. The primefocal areas for tourism investment in respondent countries are expected to be leisure (58%), hotels andresorts (55%), local infrastructure (55%) and airlines and airports (39%).The Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009

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14. ConclusionsAlthough the survey results are still coming in, there are some strong messages coming through already.Clearly the majority are expecting the recovery to take place in 2010. The long term impact is expectedto be more far reaching with a reshaping of the aviation sector to create new profitable business modelsand serve the growing demand from Asia. The nature of travel is also expected to change with a largenumber (70%) expecting to take lower cost trips and a significant number anticipating the same or higheramounts of travel and spending per trip. At the same time relaxation and cultural pursuits will be strongerinfluences on vacation choices than sustainability concerns. The vast majority express a desire to moveaway from mass market offerings to discover more unique and unspoilt destinations.As the industry struggles to come to terms with the full impact of the downturn, there is strongexpectation of innovation in business models that will generate new revenue streams to help offsetfalling prices and reduced margins. Technology advances are expected to progress relatively slowly inthe means of travel, hotel facilities and leisure experiences. Most believe that environmental concernswill result in mandatory carbon offsets for airlines. However, hotels and individual travellers are expectedto be left to take responsibility for their own environmental footprintsFinally, tourism investment is expected to be driven by the private sector rather more than the publicsector with public-private partnerships expected to be the most common model. 77% believe a cleartourism investment strategy will be key to a destination’s survival.Although the survey is still running, the early findings suggest that there is still huge cause for optimismand that the industry can emerge from the downturn well prepared to cope with the changes expected inthe coming years. To ensure survival, the critical challenge will be to ensure current decisions areinformed by well thought our views of the future and deep insight into the trends, attitudes and valuesthat will shape the purchasing behaviours of future customers.Rohit TalwarLondonMarch 9th 2009To take part in our survey on the future of travel, meetings and events, please go to:http://www.zoomerang.com/Survey/survey-intro.zgi?p=WEB228UL58782SRohit TalwarCEOFast Future ResearchTel No: +44 (0)20 8830 0766Mob No: +44 (0)7973 405145e-mail: rohit@fastfuture.comThe Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009

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Rohit Talwar – ProfileRohit is the founder of the research and consultancy organization Fast Future and an award winningfuturist speaker, entrepreneur, specialist advisor and strategic change agent. He was profiled as one thetop ten global future thinkers by the UK’s Independent newspaper. He spends his time travelling theworld researching the ideas that will shape the future and meeting the people and organizations behindthem. Rohit has spoken to audiences of travel industry leaders around the world and his book DesigningYour Future – Key Trends, Challenges and Choices was published in August 2008(http://tinyurl.com/5trt4x).He has a particular interest in the future of travel, tourism, associations and the meetings sector. Rohitpartnered with ASAE & The Center on the Association of the Future research program – the first outputof which was the Book Designing Your Future. He is currently leading major studies on the future ofglobal travel and tourism, the Future of Travel and Tourism in the Middle East and the Future of Traveland Tourism Investment in Saudi Arabia. Rohit has also completed major global studies on the Future ofChina’s Economy – The Path to 2020 and is working on scenarios for 2030 and the implications forglobal migration.Rohit has spoken and consulted on 5 continents and in over 35 countries including Australia, Belgium,Canada, China, Denmark, Finland, France, Germany, Greece, Holland, Hong Kong, Hungary, Iceland,India, Ireland, Italy, Japan, Korea, Malaysia, New Zealand, Nigeria, Pakistan, Panama, The Philippines,Portugal, Qatar, Saudi Arabia, Singapore, South Africa, Spain, Switzerland, Thailand, Turkey, UAE, UK,USA and Zimbabwe.His clients include 3M, ABN Amro, Aerovista, Alliance and Leicester, The BBC, BT, BAe, Bayer, BerwinLeighton Paisner, Chloride, Citibank, DeutscheBank, Diamond Trading Corporation (De Beers), DHL,EADS, Electrolux, Ernst & Young, GE, HBOS, Hyundai, IBM, ING, Intel, Intercontinental Hotels, KPMG,Linklaters, Marks and Spencer, Morgan Stanley, Nakheel, Nokia, Nomura, Novartis, Orange, Panasonic,Pfizer, Playtex, PwC, Qatar Airways, Royal Bank of Scotland, Samsung, Saudi Supreme Commission forTourism, Shell, Siemens, Siraj Capital, Thames Water, Travelport, Wragge and Co. and Yellow Pagesand governments in the US, UK, Finland, Dubai, Nigeria, Saudi Arabia and Singapore.Rohit’s has also worked with a number of associations and major events including the Academy for ChiefExecutives, ASAE & The Center, Arabian Travel Market, Association Management Company Institute,British Business Group Dubai, California Workforce Association, CEO Club, Chief Executives Network,Confex, Corporate Responsibility Group, EIBTM, Entrepreneur’s Organization, Green Meetings IndustryCouncil, IMEX, Institute of Chartered Accountants Scotland, Institute of Directors, International BridgeTunnel and Turnpike Association, International Special Events Society, Meeting Planners International,National Association of Broadcasters, Pacific Asia Travel Association, PCMA, Securities and InvestmentInstitute, Travel Agents Association of India, the World Student and Youth Travel Confederation and theWorld Travel Awards.The Future of Travel and Tourism – The View to 2015Rohit Talwar – March 9th 2009